Exhibit 99.1
 |
Contact:
Rush Enterprises, Inc., San Antonio
Steven L. Keller, 830-302-5226
RUSH ENTERPRISES, INC. REPORTS SECOND QUARTER 2016 RESULTS
● | Revenues of $1.026 billion, $10.8 million net income |
● | Continued challenging market conditions impact truck sales and aftermarket revenues |
● | Results include a restructuring charge of $0.9 million related to dealership consolidations and real estate impairment |
SAN ANTONIO, Texas, July 26, 2016 — Rush Enterprises, Inc. (NASDAQ: RUSHA & RUSHB), which operates the largest network of commercial vehicle dealerships in North America, today announcedthat for the quarter ended June 30, 2016, the Company achieved revenues of $1.026 billion and net income was $10.8 million, or $0.27 per diluted share, compared with revenues of $1.330 billion and net income of $19.6 million, or $0.48 per diluted share, in the quarter ended June 30, 2015. During the second quarter of 2016, the Company incurred a restructuring charge of $0.9 million to selling, general and administrative expenses related to the consolidation of certain dealerships. This restructuring charge reduced earnings per diluted share by $0.01 in the quarter.
“As expected, continued softness in the energy sector, a choppy freight environment, excess Class 8 fleet vehicle capacity, and declining used truck values plagued the industry and negatively impacted our Class 8 new and used truck sales and parts and service revenues in the second quarter,” said W. M. “Rusty” Rush, Chairman, President and Chief Executive Officer of Rush Enterprises, Inc.
“To help offset the effect of these challenging market conditions, we implemented significant and broad-reaching expense reductions throughout the first half of this year, including the consolidation of truck center locations in eight states that were operating in close proximity to other dealerships,” Rush said. “We are beginning to see the benefit from these actions, but do not expect to realize the full results of our expense management efforts until later this year.”
“I am very proud of all of our employees, particularly our operators in the field, for their efforts to maintain consistent customer service while working through store level transitions and executing our expense reduction plans. Our financial performance this quarter is evidence of our ability to effectively manage expenses in a challenging market environment,” he added.
Operations
Aftermarket Solutions
Aftermarket services accounted for approximately 66% of the Company's total gross profits, with parts, service and body shop revenues down 7% as compared to the second quarter of 2015. The Company achieved a quarterly absorption ratio of 110.3% in the second quarter of 2016.
“Our decline in aftermarket revenues during the second quarter resulted primarily from the negative impact of continued softness in the energy sector on our operations in the central United States,” explained Rush. “Additionally, our previously disclosed truck center consolidations in May and June, along with the overall decline in the Class 8 truck market, further impacted parts and service revenues this quarter,” said Rush.
“We expect parts, service and body shop sales will remain at the same pace as our second quarter performance through the remainder of the year,” Rush said.
“Despite these headwinds, we continue to invest in our long term strategic growth initiatives in the areas of all-makes parts, service technology and natural gas fuel systems. We expect to begin to realize results from these initiatives next year. In the interim, we will continue to diligently manage operating expenses and aggressively pursue opportunities for increased aftermarket business,” Rush added.
Truck Sales
U.S. Class 8 retail sales were 53,100 units in the second quarter, down 23% over the same time period last year, according to ACT Research. Rush’s Class 8 sales decreased 45% as compared to the second quarter of 2015 and accounted for 4.9% of the U.S. Class 8 truck market. ACT Research forecasts U.S. retail sales for Class 8 vehicles to be 201,500 units in 2016, a 20% decrease compared to 2015.
“Our Class 8 new truck sales in the second quarter were severely impacted by reduced demand from several of our large fleet customers and from the sluggish Class 8 truck market,” Rush said. “We will continue to work hard to gain incremental new Class 8 truck sales to replace revenues lost this year from some large fleet transactions and a continued decline in demand in the energy sector.”
“In addition, an oversupply of used Class 8 trucks across the country, combined with reduced demand and less opportunity for export, has caused used truck values to depreciate faster than historical depreciation rates. This further impeded new and used truck sales,” Rush explained. “We expect these factors will continue to impact our used truck sales in 2016, but believe our used truck inventories are at appropriate levels and correctly valued for anticipated market demand.”
“Due to the current economic climate, an uncertain freight environment, reduced order intake, excess capacity and depressed used truck values, we expect new Class 8 truck sales will remain at current levels through the end of 2016,” Rush said.
Rush’s Class 4-7 medium-duty sales decreased 4% from the second quarter of 2015, accounting for 4.9% of the total U.S. market. U.S. Class 4-7 retail sales were 57,319 units in the second quarter, up approximately 7% over the second quarter of 2015. ACT Research forecasts U.S. retail sales for Class 4-7 vehicles to reach 230,200 units in 2016, a 5.5% increase over 2015.
“Our medium-duty truck sales remained solid during the second quarter, though down slightly due to the timing of deliveries to several large fleets earlier this year, said Rush. “Throughout the second quarter, we continued to see demand for our ready-to-roll equipment from a range of market segments around the country,” said Rush. “Our ability to stock an extensive range of bodied-up Class 4-7 trucks from industry leading brands allows us to meet a wider range of our customers’ immediate needs. To this end, we added Ford trucks to our product line up in Las Vegas, Nevada, in May, expanding our medium-duty product offering in the southwest region.”
“We expect our medium-duty truck sales will remain flat with our second quarter performance through year end,” Rush said.
Financial Highlights
In the second quarter, the Company’s gross revenues totaled $1.026 billion, a 22.8% decrease from gross revenues of $1.330 billion reported for the quarter ended June 30, 2015. Net income for the quarter was $10.8 million, or $0.27 per diluted share, compared to net income of $19.6 million, or $0.48 per diluted share, in the quarter ended June 30, 2015.
Parts, service and body shop revenues were $328.7 million in the second quarter of 2016, compared to $353.3 million in the second quarter of 2015. The Company delivered 2,592 new heavy-duty trucks, 2,792 new medium-duty commercial vehicles, 386 new light-duty commercial vehicles and 1,750 used commercial vehicles during the second quarter of 2016, compared to 4,702 new heavy-duty trucks, 2,902 new medium-duty commercial vehicles, 457 new light-duty commercial vehicles and 2,009 used commercial vehicles during the second quarter of 2015.
During the second quarter the Company repurchased $20.3 million of common stock and ended the quarter with $92.7 million in cash and cash equivalents, a $20.0 million increase compared to March 31, 2016.
Conference Call Information
Rush Enterprises will host its quarterly conference call to discuss earnings for the second quarter onWednesday, July 27, 2016, at 10 a.m. Eastern/9 a.m. Central. The call can be heard live by dialing877-638-4557 (Toll Free) or 914-495-8522 (Passcode 40170598)or via the Internet athttp://investor.rushenterprises.com/events.cfm.
For those who cannot listen to the live broadcast, the webcast will be available on our website at the above link until October 10, 2016. Listen to the audio replay until August 3, 2016, by dialing855-859-2056 (Toll Free) or 404-537-3406 and entering thePasscode 40170598.
About Rush Enterprises, Inc.
Rush Enterprises, Inc. is the premier solutions provider to the commercial vehicle industry. The Company owns and operates Rush Truck Centers, the largest network of commercial vehicle dealerships in the United States, with more than 100 dealership locations in 21 states. These vehicle centers, strategically located in high traffic areas on or near major highways throughout the United States, represent truck and bus manufacturers, including Peterbilt, International, Hino, Isuzu, Ford, IC Bus and Blue Bird. They offer an integrated approach to meeting customer needs — from sales of new and used vehicles to aftermarket parts, service and body shop operations plus financing, insurance, leasing and rental. Rush Enterprises' operations also provide CNG fuel systems, telematics products, vehicle up-fitting, chrome accessories and tires. For more information, please visitwww.rushenterprises.com.
Certain statements contained herein, including those concerning current and projected market conditions, sales forecasts, demand for the Company’s services and the impact of expense reduction effortsand strategic initiativesare “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, competitive factors, general U.S. economic conditions, economic conditions in the new and used commercial vehicle markets, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, product introductions and acceptance, changes in industry practices, one-time events and other factors described herein and in filings made by the Company with the Securities and Exchange Commission.
-Tables and Additional Information to Follow-
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares and Per Share Amounts)
June 30, | December 31, | |||||||
2016 | 2015 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 92,664 | $ | 64,847 | ||||
Accounts receivable, net | 127,510 | 156,977 | ||||||
Note receivable affiliate | 12,466 | 10,611 | ||||||
Inventories, net | 1,038,598 | 1,061,198 | ||||||
Prepaid expenses and other | 11,117 | 32,953 | ||||||
Assets held for sale | 20,186 | – | ||||||
Total current assets | 1,302,541 | 1,326,586 | ||||||
Investments | 6,417 | 6,650 | ||||||
Property and equipment, net | 1,157,252 | 1,172,824 | ||||||
Goodwill, net | 290,191 | 285,041 | ||||||
Other assets, net | 56,294 | 60,907 | ||||||
Total assets | $ | 2,812,695 | $ | 2,852,008 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Floor plan notes payable | $ | 830,092 | $ | 854,758 | ||||
Current maturities of long-term debt | 134,830 | 151,024 | ||||||
Current maturities of capital lease obligations | 14,303 | 14,691 | ||||||
Liabilities directly associated with assets held for sale | 1,196 | |||||||
Trade accounts payable | 118,899 | 120,255 | ||||||
Customer deposits | 21,211 | 22,438 | ||||||
Accrued expenses | 84,073 | 83,871 | ||||||
Total current liabilities | 1,204,604 | 1,247,037 | ||||||
Long-term debt, net of current maturities | 496,658 | 496,731 | ||||||
Capital lease obligations, net of current maturities | 69,628 | 69,074 | ||||||
Other long-term liabilities | 6,645 | 5,282 | ||||||
Deferred income taxes, net | 189,153 | 188,987 | ||||||
Shareholders’ equity: | ||||||||
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2016 and 2015 | – | – | ||||||
Common stock, par value $.01 per share; 60,000,000 class A shares and 20,000,000 class B shares authorized; 29,615,609 class A shares and 10,167,314 class B shares outstanding in 2016; and 30,303,818 class A shares and 10,093,305 class B shares outstanding in 2015 | 434 | 430 | ||||||
Additional paid-in capital | 296,477 | 288,294 | ||||||
Treasury stock, at cost: 934,171 class A shares and 2,728,624 class B sharesin 2016 and 2,616,657 class B shares in 2015 | (63,667 | ) | (43,368 | ) | ||||
Retained earnings | 613,058 | 599,846 | ||||||
Accumulated other comprehensive loss, net of tax | (295 | ) | (305 | ) | ||||
Total shareholders’ equity | 846,007 | 844,897 | ||||||
Total liabilities and shareholders’ equity | $ | 2,812,695 | $ | 2,852,008 | ||||
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues: | ||||||||||||||||
New and used commercial vehicle sales | $ | 636,853 | $ | 917,878 | $ | 1,305,398 | $ | 1,718,072 | ||||||||
Parts and service sales | 328,665 | 353,268 | 670,604 | 690,290 | ||||||||||||
Lease and rental | 52,152 | 49,297 | 103,039 | 97,089 | ||||||||||||
Finance and insurance | 4,837 | 5,678 | 9,336 | 10,209 | ||||||||||||
Other | 3,955 | 4,182 | 8,925 | 8,178 | ||||||||||||
Total revenue | 1,026,462 | 1,330,303 | 2,097,302 | 2,523,838 | ||||||||||||
Cost of products sold: | ||||||||||||||||
New and used commercial vehicle sales | 591,331 | 856,274 | 1,214,991 | 1,600,534 | ||||||||||||
Parts and service sales | 209,519 | 222,225 | 427,762 | 436,922 | ||||||||||||
Lease and rental | 45,134 | 44,171 | 90,801 | 85,127 | ||||||||||||
Total cost of products sold | 845,984 | 1,122,670 | 1,733,554 | 2,122,583 | ||||||||||||
Gross profit | 180,478 | 207,633 | 363,748 | 401,255 | ||||||||||||
Selling, general and administrative expense | 146,080 | 161,309 | 308,532 | 313,936 | ||||||||||||
Depreciation and amortization expense | 12,821 | 10,829 | 25,468 | 20,823 | ||||||||||||
Gain (loss) on sale of assets | (5 | ) | 65 | 5 | (607 | ) | ||||||||||
Operating income | 21,572 | 35,560 | 29,753 | 65,889 | ||||||||||||
Interest expense, net | 3,763 | 3,598 | 8,002 | 6,539 | ||||||||||||
Income before taxes | 17,809 | 31,962 | 21,751 | 59,350 | ||||||||||||
Provision for income taxes | 6,992 | 12,386 | 8,539 | 22,993 | ||||||||||||
Net income | $ | 10,817 | $ | 19,576 | $ | 13,212 | $ | 36,357 | ||||||||
Earnings per common share: | ||||||||||||||||
Earnings per common share - Basic | $ | 0.27 | $ | 0.49 | $ | 0.33 | $ | 0.91 | ||||||||
Earnings per common share - Diluted | $ | 0.27 | $ | 0.48 | $ | 0.32 | $ | 0.89 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 40,250 | 40,275 | 40,402 | 40,171 | ||||||||||||
Diluted | 40,778 | 41,072 | 40,914 | 41,029 | ||||||||||||
This press release and the attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as Adjusted total debt, Adjusted net (cash) debt, EBITDA, Adjusted EBITDA, Free cash flow, Adjusted free cash flow and Adjusted invested capital, which exclude certain items disclosed in the attached financial tables. The Company provides reconciliations of these measures to the most directly comparable GAAP measures.
Management believes the presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current and past periods. Management believes that investors should have the same information available to them that management uses to assess the Company’s operating performance and capital structure. These non-GAAP financial measures should not be considered in isolation or as a substitute for the most comparable GAAP financial measures. Investors are cautioned that non-GAAP financial measures utilized by the Company may not be comparable to similarly titled non-GAAP financial measures used by other companies.
Three Months Ended | ||||||||
Vehicle Sales Revenue (in thousands) | June 30, 2016 | June 30, 2015 | ||||||
New heavy-duty vehicles | $ | 346,617 | $ | 602,047 | ||||
New medium-duty vehicles (including bus sales revenue) | 198,364 | 202,154 | ||||||
New light-duty vehicles | 14,353 | 16,590 | ||||||
Used vehicles | 70,920 | 90,518 | ||||||
Other vehicles | 6,599 | 6,569 | ||||||
Absorption Ratio | 110.3 | % | 118.9 | % | ||||
Absorption Ratio
Management uses several performance metrics to evaluate the performance of its commercial vehicle dealerships and considers Rush Truck Centers’ “absorption ratio” to be of critical importance. Absorption ratio is calculated by dividing the gross profit from the parts, service and body shop departments by the overhead expenses of all of a dealership’s departments, except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory. When 100% absorption is achieved, then gross profit from the sale of a commercial vehicle, after sales commissions and inventory carrying costs, directly impacts operating profit.
Debt Analysis (in thousands) | June 30, 2016 | June 30, 2015 | ||||||
Floor plan notes payable | $ | 830,092 | $ | 871,418 | ||||
Current maturities of long-term debt | 134,830 | 129,745 | ||||||
Current maturities of capital lease obligations | 14,303 | 11,724 | ||||||
Liabilities directly associated with asset held for sale | 1,196 | 5,680 | ||||||
Long-term debt, net of current maturities | 496,658 | 456,294 | ||||||
Capital lease obligations, net of current maturities | 69,628 | 49,640 | ||||||
Total Debt (GAAP) | 1,546,707 | 1,524,501 | ||||||
Adjustments: | ||||||||
Debt related to lease & rental fleet | (599,073 | ) | (569,968 | ) | ||||
Floor plan notes payable | (830,092 | ) | (871,418 | ) | ||||
Adjusted Total Debt (Non-GAAP) | 117,542 | 83,115 | ||||||
Adjustment: | ||||||||
Cash and cash equivalents | (92,664 | ) | (72,948 | ) | ||||
Adjusted Net Debt (Non-GAAP) | $ | 24,878 | $ | 10,167 | ||||
Management uses “Adjusted Total Debt” to reflect the Company’s estimated financial obligations less debt related to lease and rental fleet (L&RFD) and floor plan notes payable (FPNP), and “Adjusted Net (Cash) Debt” to present the amount of Adjusted Total Debt net of cash and cash equivalents on the Company’s balance sheet. The FPNP is used to finance the Company’s new and used inventory, with its principal balance changing daily as vehicles are purchased and sold and the sale proceeds are used to repay the notes. Consequently, in managing the business, management views the FPNP as interest bearing accounts payable, representing the cost of acquiring the vehicle that is then repaid when the vehicle is sold, as the Company’s credit agreements require it to repay loans used to purchase vehicles when such vehicles are sold. The Company’s lease & rental fleet are fully financed and are either (i) leased to customers under long-term lease arrangements or (ii), to a lesser extent, dedicated to the Company’s rental business. In both cases, the lease and rental payments fully cover the capital costs of the lease & rental fleet (i.e., the principal repayments and interest expense on the borrowings used to acquire the vehicles and the depreciation expense associated with the vehicles), plus a profit margin for the Company. The Company believes excluding the FPNP and L&RFD from the Company’s total debt for this purpose provides management with supplemental information regarding the Company’s capital structure and leverage profile and assists investors in performing analysis that is consistent with financial models developed by Company management and research analysts. “Adjusted Total Debt” and “Adjusted Net (Cash) Debt” are both non-GAAP financial measures and should be considered in addition to, and not as a substitute for, the Company’s debt obligations, as reported in the Company’s consolidated balance sheet in accordance with U.S. GAAP. Additionally, these non-GAAP measures may vary among companies and may not be comparable to similarly titled non-GAAP measures used by other companies.
Twelve Months Ended | ||||||||
EBITDA (in thousands) | June 30, 2016 | June 30, 2015 | ||||||
Net Income (GAAP) | $ | 42,908 | $ | 84,462 | ||||
Provision for income taxes | 27,296 | 53,427 | ||||||
Interest expense | 14,936 | 12,063 | ||||||
Depreciation and amortization | 48,504 | 43,614 | ||||||
(Gain) loss on sale of assets | (68 | ) | 560 | |||||
EBITDA (Non-GAAP) | 133,576 | 194,126 | ||||||
Adjustment: | ||||||||
Interest expense associated with FPNP | (13,870 | ) | (10,261 | ) | ||||
Restructuring and impairment charges | 8,930 | |||||||
Tax related to restructuring and impairment charges | (3,505 | ) | ||||||
Adjusted EBITDA (Non-GAAP) | $ | 125,131 | $ | 183,865 | ||||
The Company presents EBITDA and Adjusted EBITDA as additional information about its operating results. The presentation of Adjusted EBITDA that excludes the addition of interest expense associated with FPNP to EBITDA is consistent with management’s presentation of Adjusted Total Debt, in each case reflecting management’s view of interest expense associated with the FPNP as an operating expense of the Company, and to provide management with supplemental information regarding operating results and to assist investors in performing analysis that is consistent with financial models developed by management and research analysis. Management recorded a charge to selling, general and administrative expense during the first quarter and second quarter of 2016 related to the closing of certain dealerships and the disposition of excess real estate. Management believes adding back this charge to EBITDA provides both the investors and management with supplemental information regarding the Company’s core operating results. “EBITDA” and “Adjusted EBITDA” are both non-GAAP financial measures and should be considered in addition to, and not as a substitute for, net income of the Company, as reported in the Company’s consolidated statements of income in accordance with U.S. GAAP. Additionally, these non-GAAP measures may vary among companies and may not be comparable to similarly titled non-GAAP measures used by other companies.
Twelve Months Ended | ||||||||
Free Cash Flow (in thousands) | June 30, 2016 | June 30, 2015 | ||||||
Net cash provided by operations (GAAP) | $ | 387,859 | $ | 104,669 | ||||
Acquisition of property and equipment | (318,855 | ) | (308,819 | ) | ||||
Free cash flow (Non-GAAP) | (69,004 | ) | (204,150 | ) | ||||
Adjustments: | ||||||||
Draws (payments) on floor plan financing, net | (43,850 | ) | 173,882 | |||||
Proceeds from L&RFD | 146,128 | 185,271 | ||||||
Debt proceeds related to business acquisitions | ─ | (5,645 | ) | |||||
Principal payments on L&RFD | (157,734 | ) | (118,886 | ) | ||||
Non-maintenance capital expenditures | 117,213 | 86,792 | ||||||
Adjusted Free Cash Flow (Non-GAAP) | $ | 130,761 | $ | 117,264 | ||||
“Free Cash Flow” and “Adjusted Free Cash Flow” are key financial measures of the Company’s ability to generate cash from operating its business. Free Cash Flow is calculated by subtracting the acquisition of property and equipment included in theCash flows from investing activities fromNet cash provided by (used in) operating activities. For purposes of deriving Adjusted Free Cash Flow from the Company’s operating cash flow, Company management makes the following adjustments: (i) adds back draws (or subtracts payments) on the floor plan financing that are included inCash flows from financing activities as their purpose is to finance the vehicle inventory that is included inCash flows from operating activities; (ii) adds back proceeds from notes payable related specifically to the financing of the lease and rental fleet that are reflected inCash flows from financing activities; (iii) subtracts draws on floor plan financing, net and proceeds from L&RFD related to business acquisition assets that are included inCash flows from investing activities; (iv) subtracts principal payments on notes payable related specifically to the financing of the lease and rental fleet that are included inCash flows from financing activities; and (v) adds back non-maintenance capital expenditures that are for growth and expansion (i.e. building of new dealership facilities) that are not considered necessary to maintain the current level of cash generated by the business. “Free Cash Flow” and “Adjusted Free Cash Flow” provides management with supplemental information regarding the Company’s cash flows from operating activities, and assists investors in performing analysis that is consistent with the financial models developed by Company management.“Free Cash Flow” and “Adjusted Free Cash Flow” are both non-GAAP financial measures and should be considered in addition to, and not as a substitute for, net cash provided by (used in) operations of the Company, as reported in the Company’s consolidated statement of cash flows in accordance with U.S. GAAP. Additionally, these non-GAAP measures may vary among companies and may not be comparable to similarly titled non-GAAP measures used by other companies.
Invested Capital (in thousands) | June 30, 2016 | June 30, 2015 | ||||||
Total Shareholders' equity (GAAP) | $ | 846,007 | $ | 808,196 | ||||
Adjusted net debt (Non-GAAP) | 24,878 | 10,167 | ||||||
Adjusted Invested Capital (Non-GAAP) | $ | 870,885 | $ | 818,363 | ||||
“Adjusted Invested Capital” is a key financial measure used by the Company to calculate its return on invested capital. For purposes of this analysis, management excludes L&RFD, FPNP, and cash and cash equivalents, for the reasons provided in the debt analysis above and uses Adjusted Net Debt in the calculation. The Company believes this approach provides management with supplemental information regardingthe Company’s leverage profile and capital structure, and assists investors in performing analysis that is consistent with financial models developed by Company management and research analysts. “Adjusted Net (Cash) Debt” and “Adjusted Invested Capital” are both non-GAAP financial measures and should be considered in addition to, and not as a substitute for, total shareholders’ equity, as reported in the Company’s consolidated statements of income in accordance with U.S. GAAP. Additionally, these non-GAAP measures may vary among companies and may not be comparable to similarly titled non-GAAP measures used by other companies.